What Are the Rights of Borrower and Lender in Relation to a Mortgage Transaction?

In Australia, Real property legislation and the mortgage documents set out the rights and duties of the borrower and lender in both the legal mortgage and the equitable mortgage. The rights of the lender, under Torrens title legislation and the general law are extensive. The lender has many rights and powers even if the broad is not in default, which included the power to insure, the right to bring legal action against third parties and the power to assign the transfer of the borrower’s own interest in the mortgage. There is also the right to possession of general law only and the power to create and enforce a lease. The lenders rights and powers if the borrower defaults on the mortgage include the right to enforce the borrowers contractual obligation to pay and other covenants in the mortgage. There is the power to foreclose, the power to improve property, the right to possession, the power to appoint a receiver and the power of sale.

The rights of the borrower are also outlined in the mortgage documentation which protects the security of the lender by imposing obligations on the borrower. For or obligations include the obligation to repay principal and interest, various positive covenants such as to maintain the property and pay rates, taxes and outgoings and various negative covenants such as not to allow the property to deteriorate, not to allow nuisance and not to part with possession. Despite all his obligations, the borrower has an equity of redemption. This means that the borrower has the right to reclaim the property when the mortgage debt and costs are repaid. This is called the equity of redemption. The equity of redemption is protected by the rules of equity which prohibit any agreement or limitation or so-called clog on the equity of redemption to prevent the borrower from redeeming on payment of what is due.

These so-called clogs include provisions attempting to extinguish the right to redeem such as an option for mortgagee to purchase a property, the imposing unreasonable conditions and exclusion clauses in the mortgages, time and other limitations on the right to redeem and requiring the payment of money is other than principal, interest and other recoverable costs.